Report Outsourced Pharma Services
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A Clearwater International Healthcare team report Summer 2021
Report
Outsourced
Pharma Services
A high-growth and resilient market characterised
by high levels of M&A activity from both trade
buyers and private equity.
Inside:
• Market overview of the following subsectors:
o Contract
Research Organisations (CROs)
o Contract Development and Manufacturing
Organisations (CDMOs)
o Contract Commercialisation Organisations (CCOs)
• Leading global players
• Industry and M&A trends
• Notable recent transactions
clearwaterinternational.com
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Market Overview
Whilst 2020 was a turbulent year for
global markets following the outbreak
of COVID-19, the life sciences industry
has again demonstrated its defensibility
to global macro-economic events,
corroborated by the strong levels of M&A
activity in the sector throughout 2020 into
H1 2021.
Whilst COVID-19 resulted in disruption to
clinical trial activity, particularly impacting
clinical CROs, the life sciences sector has
generally continued to perform strongly
throughout the pandemic, buoyed by
incremental growth opportunities driven
by the industry’s efforts to develop
therapeutics and vaccines to combat the
pandemic.
have resulted in high levels of M&A activity, defensibility whilst many other sectors have
Perhaps most importantly, COVID-19 has
which have been sustained throughout been adversely impacted.
put the global life sciences industry in the
the COVID-19 pandemic. The sector has
public spotlight and has demonstrated PE activity since the onset of COVID-19
continued to consolidate, with acquirers
the fundamental role it plays in combating has been particularly high in the CCO
seeking to add scale, broaden their
infectious disease and safeguarding public market, which represents the pharma
geographical footprint and expand their
health. The speed at which therapeutics services sub-sector least impacted by the
service offerings in order to become full-
and vaccines are being developed, pandemic. Recent transactions include
service providers to their customers and
approved and commercially scaled is CD&R’s acquisition of Huntsworth, Linden’s
capture increasing share of outsourcing
truly unprecedented and has showcased acquisition of ProPharma, Bridgepoint’s
budgets.
the scientific excellence and agility of acquisition of Prescient, ICG’s acquisition
the sector, alongside the importance of In many cases, trade acquirers have sought of Lucid and LLCP’s acquisition of Prime
international collaboration in combatting to add complex and high-value services to Global.
global pandemics. enter attractive and high growth niches,
We expect continued strong PE activity
with such assets attracting high valuations.
Against the backdrop of COVID-19, the across all pharma services sub-sectors
This is illustrated in the CDMO industry, in
life sciences market continues to be in the medium term, not least because
which CDMOs serving the cell and gene
underpinned by attractive fundamentals, the pharma services market is forecast
therapy markets have attracted premium
whilst margin pressures and increasing costs to outstrip both GDP and wider pharma
valuations, such as Charles River’s recent
have resulted in an increasing propensity sector growth. This growth, supported
acquisition of Cognate BioServices for
to outsource their operations to specialist by attractive underlying fundamentals,
€727m, representing c.6.3x LTM revenue.
providers. The strong underlying growth will continue to attract investors and
of the life sciences market in combination While private equity (PE) has been encourage strategic M&A in the sector.
with this outsourcing strategy has resulted particularly active across pharma services
in significant growth of the pharma in recent years and responsible for much FX rates used in report:
services industry, with specialist outsourcers of the consolidation in the industry, activity (average annual exchange rates)
increasingly becoming key commercial levels have increased since the onset of
2014 2015 2016 2017 2018 2019 2020
partners and integral components of their COVID-19. The global PE markets continue
EUR/ 1.329 1.110 1.107 1.130 1.181 1.130 1.139
clients’ operations. to possess record levels of capital to USD
deploy and are increasingly focussing EUR/ 0.806 0.726 0.819 0.877 0.885 0.874 0.889
M&A market dynamics on the pharma services market, which GBP
The attractive market dynamics has performed strongly throughout
Source: www.ofx.com
underpinning the pharma services industry the pandemic and has demonstrated
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Contents
02 04-05
Market Outsourced Pharma Services
Overview
06-09 10-13
Contract Research Market Contract Development and
Manufacturing Market
14-17 18 20
Contract Commercialisation Recent Our US
Market transactions partner
22 23
About Clearwater International team
International
For recipients based in the United Kingdom the document has been issued and approved for the purpose of COBS 4 of
the FCA Handbook by Clearwater Corporate Finance LLP (otherwise trading as “Clearwater International”). Clearwater
International is authorised and regulated by the Financial Conduct Authority (FRN 483062). Any person falling outside of a
professional client under FCA rules should not treat this presentation as a promotion or act on it for any purpose whatsoever.
Report Outsourced Pharma Services
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Outsourced
Pharma Services
The market is highly diversified, The market can be broadly divided into the following sub-sectors:
with thousands of companies
providing a wide variety of services Contract Research Organisations (CROs)
across the pharma life cycle - provide drug discovery, pre-clinical, clinical and post-approval research services
from early-stage drug discovery and research support services to the pharma industry.
to clinical trials, advertising and
PR services. Although many of the
Contract Commercialisation Organisations (CCOs)
larger pharma services companies provide sales, marketing and other commercialisation services to the pharma
offer a broad suite of associated industry.
or synergistic services, most
players are small and offer specific
Contract Development and Manufacturing Organisations (CDMOs)
expertise in niche services.
provide drug development and manufacturing services to the pharma industry.
Manufacturing activities are typically categorised into the manufacture of active
pharma ingredients (APIs incl. biologics) and finished dosage forms (FDFs).
Overview of CRO, CDMO and CCO services across the drug development cycle
Drug development timeline
Drug discovery Pre-clinical trials Clinical trials Commercialisation
Three - six years Six - seven years Indefinite
5000 compounds *
250 compounds *
Five compounds *
One approved drug*
- Target discovery and validation - Toxicology - Patient recruitment - Patient and site engagement
- Assay development and - Pathology - Site management - Post-approval studies
screening - Drug metabolism - Project management - Real World Evidence (RWE)
CRO - Medical and process - Data analytics
- Pharmacokinetics - Pharmacovigilance
chemistry - In vitro studies - Medical writing
- Pharmacology services - In vivo studies
Services offered
Clinical batches Commercial batches
Drug development and scale-up
CDMO Tech transfer
API production (e.g. extraction, synthesis, fermentation)
Finished dose (e.g. solids, liquids, respiratory)
- Market access, assessment - Clinical and promotional
and research field teams
CCO - Launch and brand strategy - Recruitment
- Customer engagement - Medical communications
- Commercial modelling - Health economics
- Outcomes research
Source: Clearwater International, illustrative number of compounds entering each phase of drug development for each approved drug.
*
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Although a number of industry and M&A trends are specific to each of these
sub-sectors, some trends are common across the pharma services industry:
Biopharma pressures driving an Shift of expertise to outsourcers
outsourcing trend Pharma services companies typically
Although the fundamentals of the offer their expertise in specific services
pharma industry remain attractive, to multiple pharma companies, allowing
increasing R&D costs and continued them to accumulate significant
pressure on pharma companies’ know-how from multiple projects. This,
operating margins have encouraged combined with increasing outsourcing
the industry to outsource their non-core penetration and decreasing levels of
operations and rationalise their fixed in-house expertise, means that pharma
cost bases, which has resulted in the companies are becoming increasingly
significant growth of the pharma services reliant on their outsourced service
market. Continued pressures on pharma, providers.
combined with significant headroom
in outsourcing penetration today, are
expected to drive high growth in the
industry in the medium term.
Increasing uptake of technology
Technology and data are playing an
increasingly important role across all
pharma services sectors and early
Platform expansion adoption of innovative technologies
The pharma services market is are increasingly becoming key
consolidating as companies seek to differentiators. Examples in the CRO
add scale, broaden geographical sector include the use of AI and machine
presence and achieve synergies to gain a learning in drug discovery.
competitive advantage over their peers.
High levels of PE activity
The 'one-stop-shop' PE has been highly active in the sector
Driven by the desire of pharma to and responsible for much of the
reduce the number of outsourcers they consolidation of the industry, often
use, pharma services companies are amongst the market leaders in their
expanding their service offerings, either respective sectors. PE interest and activity
organically or inorganically through M&A, in the sector is higher than ever before
in order to become full-service providers, (particularly since the onset of COVID-19),
simplifying their customers’ operations and PE bidders are becoming increasingly
and capturing maximum share of their competitive with strategic acquirers in
outsourcing expenditures. M&A processes.
Report Outsourced Pharma Services
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Contract Research Market
Overview of sub-sector the expansion of the CRO sub-sector.
Key stats
The CRO market is reasonably Despite the growing range of services
consolidated, with market leaders offered by CROs, they can broadly
including IQVIA, Syneos, Parexel, PPD be grouped into the three following
and ICON. Large CROs have become categories:
key strategic partners of their sponsors/
Global CRO market was valued at Pre-clinical
pharma companies and the high growth
Pre-clinical services can be sub-divided
€38.8bn in 2018 of the market is the result of the
following factors:
into drug discovery and pre-clinical trial
services:
forecast to reach
The need to reduce R&D expenditure
€60.8bn by 20241 • Drug discovery services are typically lab-
With rising costs of R&D, it is becoming
based and involve the identification of
increasingly inefficient for innovators
promising ‘lead compounds’.
to maintain development teams and
facilities. Outsourcing has allowed • Once selected for further research, the
innovators to rationalise fixed R&D molecules then enter pre-clinical trials.
cost bases and achieve operational Assuming the compound shows signs
Current market growth of of efficacy and is safe, the innovator
efficiencies.
7.9% CAGR Increasing complexity of drugs and
will submit an Investigational New
Drug Application (IND). If approved by
through to 20241 clinical trials
regulators, the innovator has permission
The complexity of therapeutics in
to proceed with clinical trials.
development is constantly increasing,
making them more costly and challenging Clinical
to develop in-house. Furthermore, Clinical trials are typically conducted in
heightened regulatory protocols have three distinct Phases (I, II and III), each with
increased the duration, cost and different objectives, increasing numbers of
complexity of clinical trials. patients and costs.
Consolidated market
• Phase I trials are focused on basic safety
with top nine players Time and efficiency
Innovators are increasingly reliant and pharmacology in patients who
accounting for c.60% on CROs to optimise R&D activities, may not necessarily have the target
of market share2 shorten development timelines, reduce disease (c.20-100 patients). These studies
attrition rates and expand clinical trial are typically conducted at specialised
management capabilities globally. research centres and are designed to
monitor the metabolic reactions and
Expanding CRO solutions and
patient tolerance to the compounds at
technologies
multiple dosage ranges.
CROs are constantly expanding their
addressable markets by broadening their • Phase II and III trials are primarily
CRO penetration of pharmaceutical
research market expected to service offerings, capturing an increasing efficacy studies on patients afflicted
reach 50% share of pharma R&D expenditure. by the target disease. Phase II trials
Investment in technology and big data (often known as proof of concept trials)
in 20202 will continue to play an important role in test efficacy alongside dose ranging
Clearwater International
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and further safety testing (c.100-500 CRO market by segment quality relationship. Small and mid-sized
patients). Phase III trials Pre-clinical Central Lab biopharmaceutical companies are also
(9%) (4%)
are much larger (c.500-1000 patients), more likely to partner with CROs with a
in which advanced efficacy and safety therapeutic focus or specific expertise.
testing are conducted at multiple
COVID-19 impacts on the
testing centres. These are typically the
CRO sub-sector
longest and most expensive trials, and Post-approval
(45%)
regulatory authorities typically require Whilst the preclinical CRO market has
two successful Phase III trials to obtain continue to perform strongly throughout
approval. COVID-19, the clinical CRO sector has
been adversely impacted, with numerous
Post-approval
clinical trials being delayed, suspended
Post-approval, regulatory agencies Clinical
(42%)
or cancelled altogether, predominantly
typically require innovators to collect and
as a result of patient recruitment and
periodically report additional Source: Credit Suisse Research2
monitoring challenges throughout the
safety and efficacy data - sometimes
pandemic.
referred to as real world evidence The market remains reasonably
or ‘RWE’ studies. If marketed fragmented, with the top nine players The clinical CRO sector has, however,
internationally then surveillance data accounting for c.60% of the global market2 begun to recover as a result of substantial
from all countries must be collected. and several hundred smaller players investment in R&D for COVID-19 vaccines
making up the remainder of the market2. and therapeutics, alongside many
Across clinical and post-approval trials,
organisations transitioning to ‘hybrid
many CROs have developed a full suite The market has undergone a period
trials’ involving the remote enrolment and
of services allowing innovators to fully of intense consolidation over the last
virtual monitoring services to conduct
outsource their R&D activities and partner decade as a result of numerous landmark
clinical trials. COVID-19 has resulted in a
with CROs in the design and delivery mergers including LabCorp/Chiltern, INC/
rapid increase in the adoption of such
of research operations. Services CROs InVentiv, LabCorp/Covance, which have
approaches, which is driving the recovery
typically include trial planning, project been primarily driven by the desire of big
of the sector and is expected to have
management, patient recruitment, pharma to partner with fewer full-service
long lasting impacts on how clinical trials
site access, clinical staffing, patient providers.
are conducted in the future. A recent
monitoring, pharmacovigilance and
Despite this, among small and mid- acquisition demonstrating this trend
data analysis.
sized players, there is often a preference is Syneos’ acquisition of Illingworth (a
to partner with mid-sized CROs that specialist in clinical research home health
will focus on maintaining a long-term services) in December 2020 for €97m.
Large biopharmaceutical companies
prefer to outsource to full-service CROs
Big pharma 88% 5% 7%
Mid-sized biophama 75% 19% 6%
Small pharma 71% 21% 8%
Pre-revenue bio pharma 43% 53% 4%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Top 15, full service CRO Smaller CRO (beyond top 15) Other
Source: Credit Suisse Research2
1. European Pharmaceutical Review article: Global CRO market to reach $71.7 billion by 2024, says research
2. Credit Suisse report: CRO Industry Primer Report Outsourced Pharma Services
8
Leading Global
players
Dublin, Ireland
€2,300m
Hamburg, Germany
€501m
Morrisville NC, USA
€3,845m
Burlington NC, USA
€11,495m
Waltham MA, USA
c.€2,500m Wilmington NC, USA
€2,404m
Durham NC, USA Wilmington NC, USA Shanghai, China
€9,341m c.€3,850m €2,119m
Luxembourg
€5,439m
Raleigh NC, USA
€2,618m
Note: 2020 Total company revenues Source: CapIQ, Mergermarket estimates
CRO M&A activity - selected recent transactions
Date Acquiror Target Enterprise value (€m) EV/LTM EV/LTM Strategic rationale
Revenue EBITDA
15/04/2021 Thermo Fisher PPD 18,496
4.2x 22.8x -E
ntry into CRO market following entry into
CDMO market through M&A
24/02/2021 ICON PRA Health Sciences 10,084
3.8x 26.1x - CRO 'mega-merger', creating a world leading
healthcare intelligence and clinical CRO
02/09/2020 Archimed NAMSA c.340
NA 12.1x - PE deal
- Medical devices CRO
14/11/2019 Leonard Green WCG c.2,800
NA c. 17.7x -P
E deal
& Partners -C
linical trial enrolment services
12/06/2019 Dassault Medidata 8.8x NM -E
ntry into CRO market
Systemes 5,144 -C
loud based digital solutions with clinical
development and RWE applications
17/04/2019 LabCorp Envigo PC CRO business 3.1x NA -E nhances early-stage services
429
- Adds respiratory research expertise
13/02/2019 Charles River Citoxlab 448 NA 13.8x -E
nhances early-stage services
-G
rows geographic footprint
13/02/2018 Charles River MPI Research 647
3.3x 11.7x -E
nhances early-stage services
-L
arger biotech customer base
07/08/2017 PRA Symphony 449
2.6x NA - Access to cloud-based RWE data
analytics platform
31/07/2017 LabCorp Chiltern 1,018
2.2x 12.6x - Access to high-growth emerging pharma
-O ncology expertise
31/07/2017 Pamplona Parexel 4,502
2.4x 14.6x - PE deal
- Leading global CRO
Source: CapIQ, Company information, press releases, Mergermarket estimates Notes: ‘NA’: not available, ‘NM’: non meaningful
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CRO M&A trends
The sub-sector continues to consolidate, Increased interest in data-driven
with PE continuing to be highly active in CRO services
the sector. Data and analytics are becoming
increasingly important in the delivery of
Key drivers include: CRO services and a number of companies
specialising in these fields have been M&A
Increased competition for niche targets in recent years, particularly since
CRO assets the onset of COVID-19. The use of big
The large CROs are continually seeking data in trials is growing rapidly and has
small, niche acquisitions to fill any gaps improved the quality of data collection,
in or expand their existing portfolios. As allowing improved analysis of large
smaller and specialised CRO customer data sets. Examples of this are WCG’s
bases tend to be comprised of small and December 2020 acquisition of Trifecta,
mid-sized biopharma, acquiring such a provider of tech-enabled clinical trial
companies allows larger CROs to better solutions, Charterhouse’s January 2021
compete with small CROs. ICON’s €40m acquisition of Phastar, a provider of
acquisition of MedPass in June 2020 is biostatistics services to the CRO industry,
a good example of this, providing ICON and Diamond Light Source and Scripps
with increased access to the medical Research partnership with Existencia, an
devices CRO segment. AI-based drug discovery company, to
Entry into emerging therapeutic areas identify COVID-19 antiviral therapies in
Rather than develop therapeutic area March 2021.
expertise in new and complex areas
in-house, many CROs have used M&A “PE continues to be
as a means to acquire this expertise. An
example is Sygnature Discovery’s June active in the mid-market
2020 acquisition of Alderley Oncology, for CRO assets.”
adding expertise in preclinical oncology
research.
PE continues to be bullish on CROs
Entry into high-growth mid-sized and PE has played a key role in the
emerging biopharma segments consolidation of the CRO market,
Although big pharma have the largest examples including Pamplona/Parexel,
CRO outsourcing budgets and make up Advent/InVentiv Health, Bioclinica/ERT.
a significant portion of the global CRO Although these are examples of large PE
market, the highest growth segment transactions, PE continues to be active in
is emerging and mid-sized biopharma the mid-market for CRO assets. Examples
companies , which prefer to partner with
1 include Permira’s acquisition of Quotient
smaller, more specialised CROs. In order in 2019 and GHOs acquisition of X-Chem
to participate in this high growth, large in June 2020.
CROs have used M&A as a means of
adding more emerging and mid-sized
biopharma to their customer portfolios,
as demonstrated by Syneos’ acquisition of
Synteract in October 2020.
1. Credit Suisse report: CRO Industry Primer
Report Outsourced Pharma Services
10
Contract Development and
Manufacturing Market
Overview of sub-sector ctive Pharmaceutical
A
Key stats 1
Ingredients (API)
As innovator pipelines have deepened
and the complexities of developing and The commercial small molecule API
manufacturing more recent generations market is roughly divided equally between
of pharma (including biologics) originator products and generics.
c.€62bn
have increased, the need to simplify Although generic APIs typically deliver
manufacturing operations and reduce lower margins to manufacturers, this
Global CDMO market in 2017 operating expenditure has led to the is often compensated by the ability
emergence of the CDMO industry. to supply multiple customers with the
expected to reach
same API.
c.€89bn by 20221 Although many CDMOs today are
multi-disciplinary, there are very few Clinical (all)
10%
true ‘one-stop-shops’ and pharma
FDF Biologics API Generics
companies will typically use a range of 2.5%
4
Small Molecule
25%
CDMOs across their product portfolios 2
1
FDF
Branded
selected on development/manufacturing Small
Molecule
Sector growth of technologies or expertise, manufacturing 17.5% 3 CDMO market
by product
c.5.0% - 6.5%
capacity or geographical location. category
CDMO activities can broadly be divided
CAGR is outstripping into three fields: product development,
3 1 API Branded
2
FDF Generics
pharma sector growth2 manufacture of active pharmaceutical
Small Molecule
15%
Small Molecule
25%
ingredients (API), and manufacture of API Biologics
5%
finished dosage forms (FDF) - all of
which are required from the production Source: Clearwater International
of small-scale clinical batches to large-
scale commercial production. As such,
once a dedicated manufacturing line is
2 Biologics
Highly fragmented sector
top five players established and validated at a CDMO, it is
often difficult, time consuming and costly
Despite small molecule commercial
revenues accounting for the majority
only account for c.15% to switch CDMOs, meaning partnerships of the CDMO market today, biologics
of global market2 between pharma companies and their are the highest growth sub-sector as a
CDMOs are often long-lasting. result of increasing numbers of biologic
approvals and the emerging biosimilar
Despite high levels of M&A activity, the
market (as increasing numbers of
sub-sector remains highly fragmented.
biologics reach patent expiry).
The top five players have approximately
15% total market share and there is a long
CDMO penetration of pharma
tail of over 300 companies worldwide “Although many
development and manufacturing market offering CDMO services2.
set to increase from 30% in 2017
CDMOs today are multi-
disciplinary, there are very
to 40% few true ‘one-stop-shops'.”
in 20202
Clearwater International11
3 Finished Dosage Forms (FDF) 4 Clinical
FDF represents a smaller share of the Despite clinical manufacture representing
market than API, a majority of which is only a minority of the CDMO market
accounted for by oral solids. However, the (due to smaller volumes), it is crucial
oral solids market is relatively mature and for securing customers and building
lower growth than other FDFs including relationships that support commercial
liquids, semi-solids and injectables. scale manufacturing.
Injectables is the highest growth FDF COVID-19 impacts on the
segment. High levels of demand for CDMO sub-sector
injectables (primarily resulting from the
The CDMO market has continued to
growth in biologics and oncolytics),
perform strongly throughout COVID-19.
combined with high technological
Whilst clinical trial disruptions have
barriers to entry has resulted in
had a knock-on effect on non-COVID
manufacturing shortages of sterile
related clinical manufacturing revenues
injectables. Pre-filled syringes (PFS) and
for CDMOs, clinical trial supply only
other more complex injectable delivery
represents a small portion of the
systems, (including auto-injectors) are the
overall CDMO market and COVID-19
categories undergoing highest levels of
has had little impact on the supply of
growth.
approved medicines, for which demand
has remained strong throughout the
pandemic.
1. Contract Pharma article: CDMOs On The Rise
2. Kurmann Partners: Pharma M&A Report 2018 Report Outsourced Pharma Services12
Leading Global
players
Stockholm, Sweden
€1,100m
Albany NY, USA
c.€650m
Philadelphia PA, USA
c.€550m
Luxembourg
€5,439m
Starnberg, Germany
c.€800m
Somerset NJ, USA Waltham MA, USA
€2,544m €26,493m Basel, Switzerland
€4,121m
East Rutherford NJ, USA
c.€600m
Zofingen, Switzerland
€773m
Note: 2020 Total company revenues Source: CapIQ, Mergermarket estimates
CDMO M&A activity - notable transactions
Date Acquiror Target Enterprise value (€m) EV/LTM EV/LTM Strategic rationale
Revenue EBITDA
17/02/2021 Charles River Cognate BioServices 727 6.3x NA - Adds cell and gene therapy CDMO capabilities
14/12/2020 EQT Recipharm 3.2x 19.6x - PE deal
3,226 -L eading European FDF CDMO, with expertise
in sterile injectables
24/08/2020 Kohlberg & Co PCI Pharma Services c.2,550
NA c.17.6x -P E deal
- Leading US CDMO
20/07/2020 CVC Genetic Group NA 12.0x -P E deal
c.300 - Italian
CDMO focussed on ophthalmology,
respiratory and oncology therapeutics
17/03/2020 AGC Molmed 239
5.8x 28.9x - Adds cell and gene therapy, viral vector
development and manufacturing capabilities
07/08/2019 Permira Cambrex 2,267
4.4x 17.4x -P
E deal
-L
eading global CDMO
15/04/2019 Catalent Paragon Bioservices 1,062
6.0x 21.4x - I ncreased exposure to high-growth gene
and cell therapy markets
25/03/2019 Thermo Fisher Brammer Bio 1,503
8.5x NA - I ncreased exposure to high-growth gene
and cell therapy markets
23/07/2018 Cambrex Halo Pharma 363
4.0x 15.7x - Adds small molecule FDF capabilities
- Vertical integration
06/06/2017 Carlyle/GTCR AMRI 1,414
2.5x 22.2x -P E deal
- Leading global CDMO
Source: CapIQ, Company information, press releases, Mergermarket estimates Notes: ‘NA’: not available, ‘NM’: non meaningful
Clearwater International13
CDMO M&A trends
M&A across the CDMO sub-sector acquisition of Paragon BioServices for
continues to be highly active and €1.1bn (21.4x LTM EBITDA) and, most
recent months have been marked by recently, Charles River’s acquisition of
high volumes of CDMO transactions Cognate BioServices for €727m (6.3x LTM
globally, including some large landmark revenue).
transactions. We have identified a
Pharma streamlining manufacturing
number of key M&A trends:
operations
Platform expansion and the As pharma companies continue to
‘one-stop-shop’ reduce their in-house manufacturing
The desire of pharma to deal with footprints and operational expenditure,
fewer and larger CDMOs, with broad many are divesting their non-core
development and manufacturing manufacturing facilities, often with
capabilities, has driven M&A in the supply contracts, to peers, CDMOs and
sub-sector as companies look to expand PE investors which are able to operate
services offered, geographic footprint them as standalone CDMOs. Examples
and client portfolios. Examples of this of recent pharma facility divestitures
include Lonza’s €5.3bn acquisition include AstraZeneca’s divestiture of its
of Capsugel, and Cambrex’s €363m biologics facility to AGC for €90m, GSKs
acquisition of Halo Pharma. divestiture of its Ontario facility to Bora
Pharmaceuticals for €12m and Pfizer’s
Premium valuations for complex and
divestiture of its Hangzhou biosimilars
high-margin manufacturing capabilities
facility to WuXi Biologics.
CDMOs with niche and complex
manufacturing capabilities in high growth New entrants
and high margin end markets have A number of new entrants have been
commanded the highest M&A multiples. attracted to the CDMO industry and
Examples of this include: have entered through M&A. Examples
include Thermo Fisher’s 2017 acquisition
• Sterile injectables – EQT’s acquisition of
of Patheon for €6.6bn, and ACG’s 2016
Recipharm for €3.2bn (c.20x LTM EBITDA)
acquisition of CMC Biologics for €450m.
• Biologics – Catalent’s acquisition of
Increasing levels of private equity activity
Cook Pharmica for €794m (17.3x LTM
PE has played a significant role in the
EBITDA)
consolidation of the CDMO industry and
Although these sub-sectors continue to be a number of CDMO PE buyouts have
highly valued, the sector has seen a occurred in the last year. In addition to
number of recent landmark deals at the large transactions noted above, PE
unprecedented valuations for advanced activity has also been strong in the mid-
therapy (cell and gene therapy) CDMOs. market. Examples include CVC’s acquisition
This is due to the rapid growth in the of Genetic Group for c.€300m, GHOs
number of advanced therapies being acquisition of Ardena, Permira-backed
developed, a bottleneck in manufacturing Quotient’s acquisition of Arcinova, and
capacity and the high levels of complexity Keensight Capital’s acquisition of 3P
involved in developing and manufacturing Biopharma.
these therapies. Example transactions
include ACG’s acquisition of Molmed for
€239m (28.9x LTM EBITDA), Catalent’s
Report Outsourced Pharma Services14
Contract Commercialisation Market
Overview of sub-sector Market access
Key stats Activities relating to making a drug
CCOs offer a broad range of
available to patients, including
commercialisation services to their
developing pricing and reimbursement
customers, typically focussed on
strategies, healthcare economics and
preparing new products for launch and
outcomes research (HEOR) to support
Global CCO maximising sales post-approval.
market valued at pricing strategies and payer/KOL
c.€27bn
CCO services can broadly be divided into engagement services.
four sub-sectors:
Other
in 2019, expected to reach Medical affairs Predominantly regulatory, technical
c.€35bn by 20221 Services dedicated to communicating and operational services, such as
the clinical rationale, evidence and best pharmacovigilance, to support the
practice for a therapy to healthcare commercialisation of a product post
professionals (HCPs). launch.
Marketing Despite the high levels of recent M&A
Focussed on activities relating to activity in the sector, the less mature
Forecast CCO
establishing a successful brand, including nature of the CCO market means that
market growth of
analysis of the target market, developing it remains highly fragmented, with
c.8% a brand proposition and engagement
strategies for key stakeholders.
players ranging from small agencies or
consultancies specialising in specific
CAGR through to 20221
services or regions to large, diversified
CCOs with global operations.
Overview of Contract Commercialisation Services
CCO penetration of global
Sub-sector
pharmaceutical commercialisation
expenditure estimated at Medical affairs Marketing Market access Other
19% Medical Market access and
today1 communications
Market research
pricing strategy
Regulatory support
Medical Health economics and Pharmacovigilence
Brand strategy
education outcomes research support
Key services
Medical Creative Payer and KOL
IT/technical support
information services development/advert engagement
Medical
Healthcare PR
science liaison
Biopharma sales and
Real World
marketing estimated at Evidence (RWE)
Patient engagement
2x Salesforce
deployment/training
R&D spend1
Clearwater International15
Spend on outsourced commercialisation services
throughout the drug lifecycle
NDA: Approval for
use in humans
Marketing
Indicative outsourcing spend
Medical affairs
Market access
Other services
Drug discovery Phase I Phase II Phase III Patent
Launch Commercialisation
and PC trials trails trails trails expiry
Pre-clinical Clinical Post-approval
Whilst medicines can have a lifecycle Other
of 20+ years with outsourced Other CCO services are typically
commercialisation services required regulatory or operational in nature and
throughout this lifecycle, the majority of therefore, spend on these tend to be later
this spend is focussed immediately prior in the drug development and sustained
to and in the years immediately following post the launch phase.
launch, although the distribution of this
Given the increasing cost and
spend varies by sub-sector according to
complexity of R&D, successful execution
the nature of the services in relation to
of commercial strategies is becoming
the drug development cycle.
increasingly important, and biopharma
Medical affairs are investing in commercialisation
Expenditure usually commences around services earlier in the drug lifecycle as a
Phase II, following which spend increases result, across all sub-sectors.
until its peak during launch, in line with
COVID-19 impacts on the
HCP engagement activity both pre and
CCO sub-sector
post launch.
With the exception of field sales services,
Marketing
the CCO sector has been particularly
Marketing is the largest sub-sector, with
resilient to COVID-19, with a majority of
spend typically beginning around phase
companies in the sector being virtual
III and peaking during the launch phase
organisations performing desktop-based
as promotional activities intensify.
work for global biopharma customers. As
Market access such, most of these service providers have
Spend is typically the earliest in the drug transitioned well to 'working from home'
lifecycle, given the need to assess the likely environments, with minimal COVID-19
pricing and reimbursement landscape and related disruption. The resilience of the
the commercial prospects of a drug early in CCO market combined with its fragmented
its development. nature has resulted in significant levels
of M&A activity since the onset of the
pandemic, a majority of it driven by PE.
1. Delancey Street Partners report: Outsourced Pharmaceutical Services - Convergence of CROs and Healthcare Agencies
Report Outsourced Pharma Services16
Leading Global
players Dublin, Ireland
€2,300m
Milwaukee WI, USA
c.€500m
Knutsford, UK
c.€100m
Yardley PA, USA
c.€250m
Dublin, Ireland
London, UK
€1,052m
San Francisco, CA USA c.€350m
c.€200m
Morrisville NC, USA Horsham, UK Tokyo, Japan
€3,845m c.€250m €990m
Durham NC, USA
€9,341m
Overland Park KS, USA
c.€200m
Note: 2020 Total company revenues Source: CapIQ, Mergermarket estimates
CPO M&A activity - notable recent transactions
Date Acquiror Target Enterprise Value (€m) EV/LTM EV/LTM Strategic Rationale
Revenue EBITDA
26/01/2021 UDG PHMR NA NA - Strengthen European operations
36 - Addition of HEOR capabilities and increased
exposure to market access segment
01/07/2020 Arsenal Capital Cello Health 1.1x 13.3x - PE deal
198 -P harma strategy consultancy and Med
Comms business
03/03/2020 CD&R Huntsworth 642
2.1x 9.9x - PE deal
- Leading Med Comms and PR agency
17/01/2020 Clarivate DRG 4.6x 19.9x - Increased exposure to life sciences market
Analytics 863 -M arket access business with proprietary
AI-technology tools
21/05/2019 UDG Putnam Associates NA 11.1x - Expansion into new service vertical
79 -S pecialist consultancy focussed on product
commercialisation strategy
31/01/2019 Altamont Amplity NA NA NA - PE deal
Capital - CSO and commercialisation business
20/08/2018 Syneos Kinapse 106
NA NA - Expands scale in key growth markets
- Enhances commercialisation services
27/07/2017 ICON plc MAPI Development 129
2.5x NA - Expands heath outcomes research and
commercialisation services
10/05/2017 INC Research inVentiv Health 4,155 2.1x 15.4x - Adds commercial services platform
- Consolidation of CRO businesses
07/09/2016 PPD Evidera 4.3x 13.9x -C RO expending into commercialisation
102 services
- Market access and analytics business
Source: CapIQ, Company information, press releases, Mergermarket estimates Notes: ‘NA’: not available, ‘NM’: non meaningful
Clearwater International17
CCO M&A trends
Platform expansion Increasing importance of
Recent M&A activity in the sub-sector has data and technology
been driven by the desire to consolidate The use of data and technology
but also to diversify, driven by pharma’s has revolutionised the CCO market,
wish to work with fewer outsourced accelerated during the COVID-19
service providers. Although much of pandemic. A number of recent deals
this has been driven by PE bolt-on M&A at high valuations have underlined the
activity, trade acquirers are also seeking importance the market places on having
to diversify their service portfolios via access to data and technologies which
M&A. A good case study of this is Ashfield can provide a competitive advantage
(UDG) who have acquired the following over peers. Recent examples of such
new capabilities through M&A, in order to transactions include Clarivate Analytics’
create a diversified network of services to recent acquisition of DRG for €863m,
its global customer base: GHO’s recapitalisation of Envision Pharma
(both 2020), and New Mountain Capital’s
• Market access, through its acquisition of
investment in W2O in 2019.
PHMR in 2021 for €38m.
• Strategic consultancy, through its
acquisition of Putnam Associates in
“A number of recent deals
2019 for €79m. at high valuations have
• Medical communications, through underlined the importance
its acquisition of Create NYC in 2018
for €59m.
the market places on
Large players consolidating
having access to data and
CRO and CCO operations technologies.”
A number of the larger CRO providers
have achieved substantial synergies by High levels of PE activity in the sector
adding commercialisation services to PE activity in the sector has accelerated
their portfolios through M&A, allowing throughout COVID-19, primarily driven by
them to provide an ‘end-to-end’ the high growth and resilient nature of
solution to their clients throughout the sector, which has faced relatively little
the drug life cycle. Example of such disruption during the pandemic. Recent
transactions include the INC/Inventiv successful PE exits in the sector have also
merger (creating Syneos), the Quintiles/ increased the attractiveness of the sector
IMS merger (creating IQVIA) and PPD’s to many generalist funds, increasing both
acquisition of Evidera. the competitive tension and valuations in
M&A processes. In addition to those noted
above, recent notable PE deals in the
“The use of data sector include, ICGs acquisition of Lucid in
and technology has 2021, Northedge’s acquisition of Helios in
2021, Bridgepoint’s acquisition of Prescient
revolutionised the in 2021 and Fishawack in 2020, and
CCO market.” Waterland’s acquisition of IMC in 2020.
Report Outsourced Pharma Services18
Our recent
transactions
With 18 offices around the world and deals completed
in 44 countries, our team makes us a natural choice
for transactions requiring knowledge of, and access to
global markets.
The healthcare team has completed over 120 healthcare related
deals - 28 of these deals have completed within the last 18 months.
The business has more than 250 staff across Europe, North
America and Asia and running throughout our business is an
overriding commitment to exceptional outcomes for our clients.
on its sale to acquired
Sell-side Acquisition
€36m Undisclosed
acquired sold to
Acquisition Sell-side
Undisclosed Undisclosed
Clearwater Internationalraised debt finance from
sold to received investment from acquired
to support the acquisition of
Aquisition finance Sell-side Sell-side Buy-side
Undisclosed Undisclosed Undisclosed Undisclosed
acquired MBO of sold to sold a minority stake to
Buy-side Buy-side Sell-side Sell-side
Undisclosed €44m €28m Undisclosed
Report Outsourced Pharma Services20
Selected
Transactions Partner of Clearwater International
A 360-degree perspective across the healthcare
spectrum enables Cain Brothers to bring unique and
strategic ideas.
MedTech/Life Sciences
- Devices
- Medical Products and Supplies
a portfolio company of
- Pharmaceutical Services and Outsourcing
- Tools and Diagnostics
has signed a definitive
- Contract Manufacturing
agreement with
has been acquired by
- Biomaterials
Sell-side advisor Sell-side advisor
- Revenue Cycle Management
CME Life Sciences Consulting
- Patient & Provider Engagement
Healthcare IT
- Telehealth/Virtual Care
- Digital Health and Engagement
- Data Analytics
a portfolio company of
- Payer Services and Payments
has been acquired by
- Pharma/MedTech IT has been acquired by
- Hospitals and Health Systems a portfolio company of
Healthcare Providers
- Academic Medical Centres
- Post-Acute Facilities and Services
Sell-side advisor Sell-side advisor
- Alternate Site Providers
Life Science Tools CDMO
- Physician Practices
- Behavioural Health
- Laboratories
a portfolio company of
- Managed Care/Insurance
Healthcare Services
has been acquired by
- Outsourced Hospital Services
- PBMs and Pharmacy has been acquired by
- Distribution: Pharma and Products
- Benefits Management
- Population Health Management Sell-side advisor Sell-side advisor
- Consulting/Education
CRO CRO/CDMO
Clearwater International21
Disclosure: Clearwater International and KeyBanc Capital Markets (KBCM), the corporate and investment banking arm of US-based KeyCorp (NYSE:
KEY), have entered into a strategic alliance designed to enhance growth for global mid-market companies. Working in concert, KBCM and Clearwater
International will further increase the level of cross border mergers and acquisitions (M&A) on behalf of both firms’ corporate and institutional clients across
the United States, Europe and China. Clearwater International is not affiliated with KeyBanc Capital Markets Inc or its parent, KeyCorp.
KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries, KeyBanc
Capital Markets Inc., Member FINRA/SIPC, and KeyBank National Association (“KeyBank N.A.”), are marketed. Securities products and services are offered
by KeyBanc Capital Markets Inc. and its licensed securities representatives, who may also be employees of KeyBank N.A. Banking products and services are
offered by KeyBank N.A.
Tactical Opportunities has been acquired by
a portfolio company of
has invested in
has acquired
a spin-out of a portfolio company of
Senior secured credit facilities
Sole lead arranger,
sole bookrunner &
Buy-side advisor Buy-side advisor Sell-side advisor administrative agent
eClinical Life Science Tools Life Science Tools CRO
has been acquired by a portfolio company of
have acquired
has been acquired by
the drug development has been acquired by
business of
Senior secured credit facilities
$385,000,000
Joint lead arranger, sole
Sell-side advisor Sell-side advisor bookrunner, administrative agent Sell-side advisor
CRO RWE CRO CRO
a portfolio company of
a portfolio company of a portfolio company of
has acquired
has acquired
has been recapitalized by has acquired
Senior secured credit facilities
$250,000,000
Joint lead arranger, sole
Buy-side advisor Sell-side advisor Buy-side advisor bookrunner, documentation agent
CDMO CRO CRO CDMO
Report Outsourced Pharma Services22
About Clearwater
International
Clearwater International has a proven track
record of excellent client outcomes. With
18 international offices and more than 250
employees, the business has completed
over 1,900 transactions worth an aggregate
value in excess of €96bn.
Stockholm
Our experienced Debt Advisory team ensures
that clients looking to raise new debt capital or Dublin Aarhus
Leeds
refinance existing facilities have access to the Manchester Copenhagen
most sophisticated and specialised debt packages Nottingham
available internationally. Birmingham
London
We have a rich and respected heritage in private
equity, working with investors, entrepreneurs and Frankfurt
management teams over many years. Our success
Paris
comes down to our connections, knowledge, scale
and global outlook.
Milan
Our independence from any larger financial
institution or consulting firm ensures that we Marseille
can give truly objective advice, guiding clients Porto
through the challenges faced. All transactions are Barcelona
partner-led, offering high levels of personal service Madrid
Lisbon
and knowledge. We take great pride in the fact
that many of our clients return to us for advice on
multiple occasions.
Clearwater International Location
Europe
Partner Location
Chicago
Boston
Detroit Mumbai
New York
Shanghai Beijing
Dallas
Tokyo
San Francisco
São Paulo23
Our international
healthcare team
With offices in Europe, the US and Asia, our team can deliver seamless, integrated global
advice to SME/owner-managed, corporate and private equity clients. The dedicated
team provide in-depth knowledge and industry experience to every project. For more
information about any of these topics or how we can assist your business, please contact:
Ramesh Jassal John Curtin
Director, International Head of Partner, Ireland
Healthcare, UK
t: +44 845 052 0374 t: +353 1 912 1724
e: ramesh.jassal@cwicf.com e: john.curtin@cwicf.com
Franc Kaiser Francesco Perrini
Partner, China Partner, Italy
t: + 86 21 6341 0699 x 850 t: +39 02 84249370
e: franc.kaiser@cwicf.com e: francesco.perrini@cwicf.com
Jesper Agerholm Francisco Gómez
Director, Denmark Partner, Spain
t: +45 29 92 91 06 t: +34 699 446 314
e: jesper.agerholm@cwicf.com e: francisco.gomez@cwicf.com
Nicolas Saint-Pierre David Hammarström
Managing Partner, France Associate, Sweden
t: +33 153 890 509 t: +46 70 666 2954
e: nicolas.saint-pierre@cwicf.com e: david.hammarstrom@cwicf.com
Markus Otto David Weavers
Managing Partner, Germany Partner, UK
t: +49 69 58302 77 24 t: +44 845 052 0358
e: markus.otto@cwicf.com e: david.weavers@cwicf.com
Rui Miranda John Kerins
Partner, Portugal Managing Director, Cain Brothers
t: +1 212 981 6891
t: +351 918 766 799 e: jkerins@cainbrothers.com
e: rui.miranda@cwicf.com
For recipients based in the United Kingdom the document has been issued and approved for the purpose of COBS
4 of the FCA Handbook by Clearwater Corporate Finance LLP (otherwise trading as “Clearwater International”).
Clearwater International is authorised and regulated by the Financial Conduct Authority (FRN 483062). Any person
falling outside of a professional client under FCA rules should not treat this presentation as a promotion or act on it for
any purpose whatsoever.
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